The recent recessionary directional indication from the 4th quarter GDP reading should have set off some alarm bells within the economic community. However it is not unusual for readings to provide mixed signals much like they did in the winter of 1990 before Gulf War 1 began.
The ISM’s Purchasing Manager’s Index (PMI) had bounced off of a low of 39.1 in January of 1991, the exact same month that the aerial campaign against Iraq began during Gulf War 1. Fast forward to what has been twenty years of stagnant periods of manufacturing and guess what just happened in the past few months of the same survey.
Ever since the Great Financial Crisis starting in late 2006, the survey started to gyrate violently before the collapse. Again in 2012 as the Fedcession scare due to the fear that Bernanke was ending Quantitative Easing. The next time we encountered a crash and burn was the Covid era then after the Powell inflation of 2022.
Suddenly it spikes up, but how has trucking, a real time measure of economic expansion and activity behaved?
Much like it did in late 1990 and early 1991 during the Gulf War.
The surge in PMI’s over the last few months parallels the same spike witnessed during the first Gulf War.
But does this mean a sustained recovery in the transportation sector, battered by inflation and tariff wars for several years now?
Let’s take a look at some charts to get some perspective.
First the national average for diesel fuel is not only bearish for the US economy but a warning that unless prices begin to decline rapidly, as in this month, odds are the inflationary “surge” these pages predicted in December for H1 will occur resulting in a short term stagflationary effect.
Meanwhile the Cass Freight Index while indicating some increase in activity still far below the post-Covid expansion and worse, the pre-Covid Trump v1.0 era.
The trend is still indicative of stagnation due to regional areas still experiencing economic slowdowns due to dropping consumer demand.
The most interesting aspect of this surge in activity reported on some websites and metrics is that the expansion seems somewhat limited. If indeed freight demand was increasing to the point where motor carriers were willing to expand beyond the normal replacement cycle, the Class 8 and other heavy duty truck sales should be expanding dramatically. Yet the data has yet to support this theory.
Despite a late Q4 2025 bounce, the level of sales is consistent with economic contraction and worse, a potential rollover into a deep recession.
The same information is reflected in the trucking industry employment data just reported last week and for the last twenty years.
The bad news about the chart above is that there are still numerous indications that hiring illegal truck drives is possibly the stop gap transportation some trucking employers have elected to fulfill the shortfall for profit. The recent 60 Minutes story about the dangerous use of fake trucking companies, unqualified illegal (non-citizen) drivers, and unsafe equipment should be a wake up call.
This brings these pages full circle to the crux of the issue. If the economy was expanding at a rapid pace, illegal trucking companies as well as legitimate startup carriers and owner operators would be engaged in purchasing new and used equipment in large quantities in expectation of an upcoming economic expansion.
This article via the Commercial Carrier Journal, Day Cab Trucks Lead Declines as Used Truck Inventory Tightens, indicates that while smaller local P&D (Pickup and delivery) truck inventories are starting to tighten, long range over the road sleeper cab demand still remains suppressed. From the article:
In the overall market, inventory continued its downward trajectory in March, falling 5.07% from February and 15.71% compared to a year ago. Sleeper trucks led monthly declines with a 5.83% drop, while used day cab trucks saw the steepest year-over-year contraction at 19.49%.
Pricing softened as well, with asking values decreasing 1.53% from March and down 2.45% year-over-year. Used sleeper trucks saw the sharpest monthly asking price decline at 2.02%, and day cabs again led the yearly decline at 3.94%.
Theoretically, if demand was actually increasing with inventory tightening, prices should be increasing. But as the article highlights, price declines continue year over year from three year depressed levels, an indication that perhaps things are not turning around as rapidly as one might hope.
The longer this conflict in the Middle East lasts, the greater the risk this downturn becomes far more severe as government demand for long haul and LTL carriers can not overcome consumer demand dropping off of a cliff.